First M&F Corp. earnings per share up 93%

KOSCIUSKO, Miss., Jan. 25, 2013 /PRNewswire/ -- First M&F Corp. (NASDAQ: FMFC) today reported 2012 net income of $6.985 million as compared to a net income of $4.373 million for 2011, a 59.7% percent increase. Earnings allocated to common shareholders were $4.919 million, or $0.54 basic and diluted earnings per share, compared to earnings of $2.584 million, or $.28 basic and diluted earnings per share for 2011. "Our management team is gratified and proud to announce a 93% improvement in common earnings per share. From virtually every perspective the M&F Team has led the Company to a much improved performance," said Hugh S. Potts, Jr., Chairman and CEO.

Net income for the quarter ended December 31, 2012 was $1.290 million allocated to common shareholders, or $.14 basic and diluted earnings per share, compared to $.530 million, or $.05 basic and diluted earnings per share for the fourth quarter of 2011.

For the fourth quarter of 2012 the annualized return on assets was 0.46%, while return on common equity was 5.40%. Comparatively, the return on assets for the fourth quarter of 2011 was 0.25%, with a return on common equity of 2.27%. The return on assets for 2012 was 0.44%, while the return on common equity was 5.30%.

Mr. Potts continued, "At the risk of a noticeable repetition, we must report that our credit trends are continuing the improvement began during the depths of the current credit cycle. These trends in credit improvement are foundational to M&F's improved earnings." At year-end 2012 nonaccrual loans to total loans improved to 0.75% from 1.68% at the end of 2011.

Net Interest Income

Net interest income for the quarter was flat compared to the fourth quarter of 2011, with the net interest margin falling to 3.56% in the fourth quarter of 2012 as compared to 3.64% in the fourth quarter of 2011. The net interest margin for the third quarter of 2012 was 3.73% as compared to 3.72% for the second quarter of 2012 and 3.67% for the first quarter of 2012 as spreads began to narrow late in the year. Loan yields decreased to 5.37% in the fourth quarter of 2012 from 5.74% in the fourth quarter of 2011. Loan yields fell from the third quarter of 2012 to the fourth quarter. Average loans were $1.008 billion for the fourth quarter of 2012 showing virtually no change since the third quarter also averaged $1.007 billion and average loans were $1.014 billion during the fourth quarter of 2011. Loans held for investment fell by $11.854 million in the fourth quarter of 2012 and grew by $4.731 million in the third quarter as loan demand, though somewhat robust, was offset by pay-offs and competitive pressures.

Deposit costs fell in the fourth quarter of 2012 from the third quarter of 2012 and from the fourth quarter of 2011, as deposits were re-priced downward throughout 2012 in the current stable low-rate environment, continuing a trend beginning in the fourth quarter of 2007. Interest-bearing deposit costs were 0.66% in the fourth quarter of 2012 as compared to 1.01% in the fourth quarter of 2011. Deposits grew by $53.201 million during the fourth quarter of 2012. Management continues to emphasize and focus on core deposit growth by developing and promoting relationship-driven deposit gathering while de-emphasizing non-core deposit funding. Loans held for investment as a percentage of assets were 60.90% at December 31, 2012 as compared to 63.52% at December 31, 2011 and 63.57% at September 30, 2012.

Non-interest Income

Non-interest income, excluding securities transactions and other-than-temporary impairment on securities, for the fourth quarter of 2012 was up by 7.49% compared to the fourth quarter of 2011, with deposit-related income down by 2.08% and mortgage income up 154.69% on higher volumes. For the year, mortgage income was up 191.27%, as the department took advantage of growing refinancing trends and built a wholesale delivery channel to supplement retail efforts. Other income in the year ago quarter had been bolstered by gains realized on the sale of closed branches. Insurance agency commissions were up only 1.25%.

Non-interest income, excluding securities transactions and other-than-temporary impairment on securities, was up 14.58% for 2012 versus 2011. Over half of non-interest income is from deposit sources, which was virtually flat, only down 1.10% year over year. Deposit revenues continue to be supported by debit card fee income, which continue to grow and which increased by 11.17% in the fourth quarter of 2012 over the year-ago quarter, and overdraft fee income, which, however, decreased by 8.59% quarter over quarter.

Non-interest Expenses

Non-interest expenses were lower by 7.72% in the fourth quarter of 2012 as compared to the fourth quarter of 2011. Salaries and benefits for the quarter were lower by 7.42% compared to the year-ago quarter and both Occupancy and Equipment expenses were down as well, mostly reflecting the cost savings effects of Project McKinley. As Other Real Estate assets are disposed of and as the preponderance of properties are raw or subdivided land, and as appraised values somewhat stabilize, carrying costs and write downs trend downward. Quarter over quarter Foreclosed property expense declined 37.86% and year over year by 29.45%. Most of the increase in Other Expenses was due to volume-related mortgage expenses.

The number of full-time equivalent employees for the fourth quarter of 2012 averaged 463 as compared to 469 for the third quarter of 2012 and 482 for the fourth quarter of 2011.

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the fourth quarter of 2012 were 0.46% as compared to 1.37% for the same period in 2011. Non-accrual and 90-day past due loans as a percent of total loans were 0.78% for the last quarter of 2012 as compared to 1.74% at the end of 2011. Annualized net charge-offs as a percentage of average loans for 2012 were 0.61% as compared to 1.05% for 2011. The allowance for loan losses as a percentage of loans was 1.79% at December 31, 2012 as compared to 1.50% at December 31, 2011. The provision for loan losses fell in 2012 from $9.720 million in 2011 to $8.520 million in 2012 as charge-offs, new nonaccruals and new loan impairments all continued to wane.

Balance Sheet

Total assets grew by 2.11% in 2012, to $1.602 billion from $1.569 billion. Total equity grew to $118.443 million, an 8.07% increase from 2011. Total loans held for investment were $.975 billion compared to $.996 billion at the end of 2011. Deposits were $1.403 billion compared to $1.371 billion at the end of 2011. Book value per common share increased to $10.79 per share at the end of 2012, a 7.36% increase from 2011.

Conclusion

Mr. Potts commented,"The heavy clouds and darkness of 2008 and 2009 have lifted as rays of less ominous circumstances break through. On the horizon remain the specter of regulation, international tension and an avalanche of government influence upon a very tenuous economy." In conclusion, Mr. Potts stated, "Credit quality has led M&F's earnings surge and will continue to contribute in the short and mid-term to improving earnings. Another bright spot has been our mortgage operation as originations, mostly from refinancing, have grown dramatically. We expect overall improved performance to continue in 2013."

About First M&F Corporation

First M&F Corp., the parent of M&F Bank, is committed to proceed with its mission of making the mid-south better through the delivery of excellence in financial services to 26 communities in Mississippi, Alabama and Tennessee.

Caution Concerning Forward‑Looking Statements

This document includes certain "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market and regulatory factors. More detailed information about those factors is contained in First M&F Corporation's filings with the Securities and Exchange Commission.

First M&F Corporation

Condensed Consolidated Statements of Condition (Unaudited)

(In thousands, except share data)

December 31

December 31

2012

2011

Cash and due from banks

$ 54,811

$ 39,976

Interest bearing bank balances

94,313

39,391

Federal funds sold

10,000

25,000

Securities available for sale (cost of

$341,273 and $315,890)

348,562

320,774

Loans held for sale

21,014

26,073

Loans

975,473

996,340

Allowance for loan losses

17,492

14,953

Net loans

957,981

981,387

Bank premises and equipment

37,264

37,989

Accrued interest receivable

5,683

6,122

Other real estate

25,970

36,952

Other intangible assets

4,159

4,586

Other assets

41,926

50,401

Total assets

$ 1,601,683

$ 1,568,651

Non-interest bearing deposits

$ 276,295

$ 231,718

Interest bearing deposits

1,126,380

1,139,745

Total deposits

1,402,675

1,371,463

Federal funds and repurchase agreements

3,720

4,398

Other borrowings

36,007

43,001

Junior subordinated debt

30,928

30,928

Accrued interest payable

661

1,023

Other liabilities

9,249

8,242

Total liabilities

1,483,240

1,459,055

Preferred stock, 30,000 shares issued and outstanding

18,866

17,564

Common stock, 9,230,799 and 9,154,936

shares issued & outstanding

46,154

45,775

Additional paid-in capital

32,469

31,895

Nonvested restricted stock awards

244

674

Retained earnings

19,179

14,456

Accumulated other comprehensive income (loss)

1,531

(768)

Total equity

118,443

109,596

Total liabilities & equity

$ 1,601,683

$ 1,568,651

First M&F Corporation and Subsidiary

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except share data)

Three Months Ended December 31

Twelve Months Ended December 31

2012

2011

2012

2011

Interest and fees on loans

$ 13,409

$ 14,482

$ 55,005

$ 60,201

Interest on loans held for sale

188

154

767

275

Taxable investments

1,208

1,297

5,682

6,745

Tax exempt investments

330

318

1,292

1,252

Federal funds sold

4

16

30

63

Interest bearing bank balances

47

38

146

179

Total interest income

15,186

16,305

62,922

68,715

Interest on deposits

1,849

2,897

8,627

13,501

Interest on fed funds and repurchase agreements

5

6

21

36

Interest on other borrowings

393

467

1,704

1,979

Interest on subordinated debt

298

292

1,177

1,335

Total interest expense

2,545

3,662

11,529

16,851

Net interest income

12,641

12,643

51,393

51,864

Provision for possible loan losses

1,980

2,280

8,520

9,720

Net interest income after loan loss

10,661

10,363

42,873

42,144

Service charges on deposits

2,586

2,641

10,180

10,293

Mortgage banking income

1,574

618

5,304

1,821

Agency commission income

808

798

3,486

3,636

Fiduciary and brokerage income

170

153

587

584

Other income

605

1,133

2,713

3,102

Other-than-temporary impairment on securities, net of

$0, $49, $21 and $263 reclassified to/from other

comprehensive income

-

(50)

(29)

(631)

Gains (losses) on AFS securities

(8)

619

557

2,769

Total noninterest income

5,735

5,912

22,798

21,574

Salaries and employee benefits

6,387

6,899

26,887

28,469

Net occupancy expense

797

1,003

3,554

3,935

Equipment expenses

418

479

1,726

1,871

Software and processing expenses

366

378

1,428

1,540

FDIC insurance assessments

511

530

1,911

2,426

Foreclosed property expenses

1,272

2,047

5,186

7,351

Intangible asset amortization and impairment

107

107

427

427

Other expenses

4,055

3,634

15,159

12,315

Total noninterest expense

13,913

15,077

56,278

58,334

Net income before taxes

2,483

1,198

9,393

5,384

Income tax expense

652

211

2,408

1,011

Net income

$ 1,831

$ 987

$ 6,985

$ 4,373

Earnings Per Common Share Calculations:

Net income

$ 1,831

$ 987

$ 6,985

$ 4,373

Dividends and accretion on preferred stock

(488)

(454)

(1,901)

(1,774)

Net income applicable to common stock

1,343

533

5,084

2,599

Earnings attributable to participating securities

53

3

165

15

Net income allocated to common shareholders

$ 1,290

$ 530

$ 4,919

$ 2,584

Weighted average shares (basic)

9,216,746

9,145,108

9,181,012

9,126,605

Weighted average shares (diluted)

9,218,990

9,145,108

9,182,034

9,126,605

Basic earnings per share

$ 0.14

$ 0.05

$ 0.54

$ 0.28

Diluted earnings per share

$ 0.14

$ 0.05

$ 0.54

$ 0.28

First M&F Corporation

Financial Highlights

YTD Ended

YTD Ended

December 31

December 31

2012

2011

Performance Ratios:

Return on assets (annualized)

0.44%

0.27%

Return on equity (annualized) (a)

6.12%

4.00%

Return on common equity (annualized) (a)

5.30%

2.81%

Efficiency ratio (c)

74.98%

78.47%

Net interest margin (annualized, tax-equivalent)

3.67%

3.68%

Net charge-offs to average loans (annualized)

0.61%

1.05%

Nonaccrual loans to total loans

0.75%

1.68%

90 day accruing loans to total loans

0.03%

0.06%

QTD Ended

QTD Ended

QTD Ended

QTD Ended

December 31

September 30

June 30

March 31

2012

2012

2012

2012

Per Common Share (diluted):

Net income

$ 0.14

$ 0.14

$ 0.14

$ 0.12

Cash dividends paid

0.01

0.01

0.01

0.01

Book value

10.79

10.69

10.44

10.20

Closing stock price

6.98

7.42

5.18

4.80

Loan Portfolio Composition: (in thousands)

Commercial, financial and agricultural

$ 153,549

$ 155,890

$ 147,773

$ 144,319

Non-residential real estate

542,860

554,475

567,184

568,811

Residential real estate

200,992

197,629

189,927

188,891

Home equity loans

37,736

37,196

36,183

36,098

Consumer loans

40,336

42,137

41,529

41,376

Total loans

$ 975,473

$ 987,327

$ 982,596

$ 979,495

Deposit Composition: (in thousands)

Noninterest-bearing deposits

$ 276,295

$ 233,684

$ 236,145

$ 238,603

NOW deposits

423,461

386,371

391,726

421,249

MMDA deposits

214,091

216,620

211,447

222,016

Savings deposits

118,123

117,404

116,598

121,872

Core certificates of deposit under $100,000

188,733

201,361

208,684

213,944

Core certificates of deposit $100,000 and over

165,979

177,084

178,926

176,761

Brokered certificates of deposit under $100,000

3,549

3,417

3,393

3,234

Brokered certificates of deposit $100,000 and over

12,444

13,533

14,419

12,829

Total deposits

$ 1,402,675

$ 1,349,474

$ 1,361,338

$ 1,410,508

Nonperforming Assets: (in thousands)

Nonaccrual loans

$ 7,444

$ 6,219

$ 6,443

$ 14,604

Other real estate

25,970

28,002

31,077

34,636

Investment securities

733

644

639

646

Total nonperforming assets

$ 34,147

$ 34,865

$ 38,159

$ 49,886

Accruing loans past due 90 days or more

$ 321

$ 408

$ 1,537

$ 245

Restructured loans (accruing)

$ 21,800

$ 16,784

$ 18,372

$ 19,077

Total nonaccrual loan to loans

0.75%

0.62%

0.64%

1.45%

Total nonperforming credit assets to loans and ORE

3.27%

3.29%

3.62%

4.72%

Total nonperforming assets to assets ratio

2.13%

2.24%

2.44%

3.10%

Allowance For Loan Loss Activity: (in thousands)

Beginning balance

$ 16,656

$ 15,310

$ 16,084

$ 14,953

Provision for loan loss

1,980

1,980

2,280

2,280

Charge-offs

(1,584)

(1,035)

(3,460)

(2,061)

Recoveries

440

401

406

912

Ending balance

$ 17,492

$ 16,656

$ 15,310

$ 16,084

First M&F Corporation

Financial Highlights

QTD Ended

QTD Ended

QTD Ended

QTD Ended

December 31

September 30

June 30

March 31

2012

2012

2012

2012

Condensed Income Statements: (in thousands)

Interest income

$ 15,186

$ 15,625

$ 15,906

$ 16,205

Interest expense

2,545

2,753

2,990

3,241

Net interest income

12,641

12,872

12,916

12,964

Provision for loan losses

1,980

1,980

2,280

2,280

Noninterest revenues

5,735

5,607

6,035

5,421

Noninterest expenses

13,913

14,060

14,319

13,986

Net income before taxes

2,483

2,439

2,352

2,119

Income tax expense

652

645

599

512

Net income

$ 1,831

$ 1,794

$ 1,753

$ 1,607

Preferred dividends

(488)

(479)

(471)

(463)

Net income applicable to common stock

1,343

1,315

1,282

1,144

Earnings attributable to participating securities

53

51

56

5

Net income allocated to common shareholders

$ 1,290

$ 1,264

$ 1,226

$ 1,139

Tax-equivalent net interest income

$ 12,859

$ 13,088

$ 13,134

$ 13,181

Selected Average Balances: (in thousands)

Assets

$ 1,585,467

$ 1,546,416

$ 1,577,420

$ 1,607,013

Loans held for investment

982,894

984,282

973,545

983,800

Earning assets

1,436,348

1,396,824

1,420,370

1,445,332

Deposits

1,381,667

1,343,559

1,379,716

1,409,393

Equity

117,529

115,544

112,466

110,745

Common equity

98,837

97,186

94,430

93,025

Selected Ratios:

Return on average assets (annualized)

0.46%

0.46%

0.45%

0.40%

Return on average equity (annualized) (a)

6.19%

6.18%

6.27%

5.84%

Return on average common equity (annualized) (a)

5.40%

5.38%

5.46%

4.95%

Average equity to average assets

7.41%

7.47%

7.13%

6.89%

Tangible equity to tangible assets (b)

7.15%

7.28%

7.04%

6.67%

Tangible common equity to tangible assets (b)

5.97%

6.08%

5.87%

5.55%

Net interest margin (annualized, tax-equivalent)

3.56%

3.73%

3.72%

3.67%

Efficiency ratio (c)

74.83%

75.21%

74.70%

75.18%

Net charge-offs to average loans (annualized)

0.46%

0.26%

1.26%

0.47%

Nonaccrual loans to total loans

0.75%

0.62%

0.64%

1.45%

90 day accruing loans to total loans

0.03%

0.04%

0.15%

0.02%

Price to book

0.65x

0.69x

0.50x

0.47x

Price to earnings

12.46x

13.25x

9.25x

10.00x

First M&F Corporation

Financial Highlights

Historical Earnings Trends:

Earnings

Earnings

Applicable to

Allocated to

Common

Common

Earnings

Stock

Shareholders

EPS

(in thousands)

(in thousands)

(in thousands)

(diluted)

4Q 2012

$ 1,831

$ 1,343

$ 1,290

$ 0.14

3Q 2012

1,794

1,315

1,264

0.14

2Q 2012

1,753

1,282

1,226

0.14

1Q 2012

1,607

1,144

1,139

0.12

4Q 2011

987

533

530

0.05

3Q 2011

1,330

882

878

0.10

2Q 2011

1,106

666

661

0.07

1Q 2011

950

518

515

0.06

4Q 2010

641

266

267

0.03

Revenue Statistics:

Non-interest

Non-interest

Revenues

Revenues to

Revenues to

Per FTE

Ttl. Revenues

Avg. Assets

(thousands)

(percent)

(percent)

4Q 2012

$ 40.2

30.85%

1.44%

3Q 2012

39.9

29.99%

1.44%

2Q 2012

41.1

31.48%

1.54%

1Q 2012

40.5

29.14%

1.36%

4Q 2011

39.0

31.48%

1.50%

3Q 2011

36.6

27.96%

1.30%

2Q 2011

36.6

25.88%

1.18%

1Q 2011

37.9

30.67%

1.43%

4Q 2010

35.4

28.19%

1.25%

Expense Statistics:

Non-interest

Expense to

Efficiency

Avg. Assets

Ratio

(percent)

(percent) (c)

4Q 2012

3.49%

74.83%

3Q 2012

3.62%

75.21%

2Q 2012

3.65%

74.70%

1Q 2012

3.50%

75.18%

4Q 2011

3.82%

80.29%

3Q 2011

3.52%

75.76%

2Q 2011

3.59%

78.56%

1Q 2011

3.70%

79.26%

4Q 2010

3.69%

83.22%

First M&F Corporation

Average Balance Sheets/Yields and Costs (tax-equivalent)

(In thousands with yields and costs annualized)

QTD December 2012

QTD December 2011

Average

Average

Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

$ 80,925

0.23%

$ 44,653

0.33%

Federal funds sold

5,707

0.26%

25,000

0.25%

Taxable investments (amortized cost)

303,164

1.59%

283,986

1.81%

Tax-exempt investments (amortized cost)

38,464

5.45%

33,923

5.94%

Loans held for sale

25,194

2.98%

20,517

2.98%

Loans held for investment

982,894

5.44%

993,869

5.79%

Total earning assets

1,436,348

4.27%

1,401,948

4.68%

Non-earning assets

149,119

162,583

Total average assets

$ 1,585,467

$ 1,564,531

NOW

$ 392,825

0.34%

$ 369,789

0.47%

MMDA

220,774

0.24%

186,898

0.62%

Savings

118,852

0.89%

118,833

1.05%

Certificates of Deposit

383,291

1.16%

459,182

1.60%

Short-term borrowings

3,447

0.57%

4,809

0.53%

Other borrowings

67,996

4.05%

74,431

4.04%

Total interest bearing liabilities

1,187,185

0.85%

1,213,942

1.20%

Non-interest bearing deposits

265,925

231,926

Non-interest bearing liabilities

14,828

8,180

Preferred equity

18,692

17,406

Common equity

98,837

93,077

Total average liabilities and equity

$ 1,585,467

$ 1,564,531

Net interest spread

3.42%

3.48%

Effect of non-interest bearing deposits

0.16%

0.19%

Effect of leverage

-0.02%

-0.03%

Net interest margin, tax-equivalent

3.56%

3.64%

Less tax equivalent adjustment:

Investments

0.05%

0.05%

Loans

0.01%

0.01%

Reported book net interest margin

3.50%

3.58%

First M&F Corporation

Average Balance Sheets/Yields and Costs (tax-equivalent)

(In thousands with yields and costs annualized)

YTD December 2012

YTD December 2011

Average

Average

Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

$ 54,808

0.27%

$ 70,998

0.25%

Federal funds sold

11,566

0.26%

25,000

0.25%

Taxable investments (amortized cost)

314,889

1.80%

265,446

2.54%

Tax-exempt investments (amortized cost)

37,004

5.57%

33,390

5.98%

Loans held for sale

25,264

3.04%

8,566

3.21%

Loans held for investment

981,143

5.62%

1,032,137

5.85%

Total earning assets

1,424,674

4.48%

1,435,537

4.85%

Non-earning assets

154,333

158,747

Total average assets

$ 1,579,007

$ 1,594,284

NOW

$ 400,215

0.40%

$ 389,052

0.63%

MMDA

218,041

0.35%

172,978

0.72%

Savings

119,741

0.95%

117,686

1.12%

Certificates of Deposit

401,097

1.27%

489,199

1.73%

Short-term borrowings

4,017

0.53%

10,855

0.33%

Other borrowings

70,818

4.07%

76,923

4.31%

Total interest bearing liabilities

1,213,929

0.95%

1,256,693

1.34%

Non-interest bearing deposits

239,402

220,369

Non-interest bearing liabilities

11,592

7,852

Preferred equity

18,203

16,967

Common equity

95,881

92,403

Total average liabilities and equity

$ 1,579,007

$ 1,594,284

Net interest spread

3.53%

3.51%

Effect of non-interest bearing deposits

0.16%

0.20%

Effect of leverage

-0.02%

-0.03%

Net interest margin, tax-equivalent

3.67%

3.68%

Less tax equivalent adjustment:

Investments

0.05%

0.05%

Loans

0.01%

0.02%

Reported book net interest margin

3.61%

3.61%

First M&F Corporation

Notes to Financial Schedules

(a) Return on equity is calculated as: (Net income attributable to First M&F Corp) divided by (Total equity)

Return on common equity is calculated as: (Net income attributable to First M&F Corp minus preferred dividends) divided by